Though specific financing details are not being disclosed, Cue will get an upfront payment and up to $374 million in research, development, regulatory and commercial milestone payments, as well as tiered royalties on sales.

Cue has not gone into great detail, but says that the "multi-year collaboration will encompass multiple disease targets across certain primary disease indication areas."

Dive Insight:

Autoimmune diseases aren't currently one of Merck & Co.'s six areas of strength, so this could signal a new area of investigation for the big pharma. Cue Biopharma's technology approach is through generating highly targeted and selective T cell responses, and this could also have potential in cancer, which is closer to Merck's core focus. What may also prove enticing to Merck is that Cue's lead immuno-oncology program, CUE 101, which targets human papillomavirus (HPV)-associated cancers and is expected to enter the clinic during the first half of 2018, has shown synergy with checkpoint inhibitors in preclinical trials.

Despite having been founded in 2015, Cue has been operating under the radar until the beginning of this year, when it announced that it had raised $26 million of invested private capital. The deal with Merck appears to be Cue's first.

"It has become increasingly clear that more effective and less toxic approaches to immune modulation are needed via precise communication with and control of T cells," said Daniel Passeri, president and CEO of Cue Biopharma. "With our platform, we have demonstrated selectivity for and modulation of disease-relevant T cells."